Dave Says: The simple thing is the right thing

By Dave Ramsey
Ramsey Solutions
Dear Dave,

I went through a divorce a couple of months ago, and I’m not sure what to do next. I received custody of our kids, ages 13 and 15, plus I have a good job and I got the house in the settlement. It’s a nice, simple home, but it’s paid for and worth about $200,000. I receive $1,400 a month in child support, and I got $125,000, which was half our savings. I also have no other debt. Most of my friends are telling me I should begin investing, but they all have different ideas about where I should put the money. Can you give me some guidance?

—Michelle

Dear Michelle,

I’m so sorry to hear you’re going through this. Divorce is hard enough when it’s just a couple, but it must be incredibly difficult with kids involved. Make sure you spend lots of time hugging on them, and telling them how much you love them. God bless you guys.

Ok, I know your friends are just trying to help, but I wouldn’t follow their financial advice right now. The trauma from your divorce is still fresh, and you should never make important, long-range decisions when your emotions are messed up. If there’s anything positive in all this, it’s that you’re in a really nice place where your finances are concerned. You’ve got a good job, you have no debt, and you’ve got six figures sitting in the bank.

My advice is to park that money in a CD until you feel you’re getting over the shock of what has happened. You won’t make much money doing this, but you won’t lose any, either. Then, after some time has passed, I want you to find a good financial advisor—one with the heart of a teacher—and look into investing $25,000 in good growth stock mutual funds. I’m talking about ones with at least a 10-year track record of success.

Time and knowledge can help erase fear, Michelle. Plus, you’ve got a responsibility to yourself and your kids to invest wisely.

—Dave

Dear Dave,

Should you still pay debts that are in collections, even if they have been dropped from your credit report? The one in question is from 2011, and I assume it isn’t showing on the credit report anymore because it’s nine years old.

—Sam

Dear Sam,

There are two good reasons to go back and deal with this debt. One, even if it’s off your credit report, you may still legally owe the money. Even if the statute of limitations has run its course, things like this have a habit of popping up and causing problems at the worst possible times. About the time you decide to buy a home, this is liable to raise its head again and mess things up. So, the fact that something doesn’t appear on a credit report doesn’t mean you’re not legally liable, or that they won’t bother you about it later.

The second thing to think about is a simple matter of fact—you owe the money. Regardless of what the legal system or credit report says, you morally owe the money. I’d contact the creditor, and begin negotiations to settle the debt. You might be able to reach an agreement where they’d accept less than the original amount owed. Regardless, get any type of settlement offer in writing. That way, you’re truly cleaning up your life and getting rid of any financial skeletons in your closet!

—Dave

Dave Ramsey is CEO of Ramsey Solutions. He has authored seven best-selling books, including “The Total Money Makeover.” The “Dave Ramsey Show” is heard by more than 16 million listeners each week on 600 radio stations and multiple digital platforms. Follow Dave on the web at daveramsey.com and on Twitter at @DaveRamsey.